Save on Auto Loans
Probably the second biggest expense most people pay besides rent or a mortgage is their car loan. With cars costing more than $20K, buying a car can weigh heavily on almost anyone’s pocket. If you are looking for a few good ways to save on your next car loan, here are some tips.
Do Your Homework
Before you ever set foot in a car dealership’s showroom, make sure you research and learn about auto loans. The difference between knowing about auto loans and not could mean the difference in saving thousands of dollars. If you are buying a car using an auto loan, then not only will you have to figure in the cost of the vehicle, but the cost of the loan as well (e.g. interest rates).
Shop at Your Dealership As Well As Your Bank
Today, many car buyers not only buy their car at the dealership, but also buy a loan at the dealership. While this may be convenient for many, it could also mean that you pay much more in the long run. If you are planning on buying a vehicle, make sure you shop at several banks to find the lowest rates for an auto loan. It is a big misconception that in order to buy an auto at a dealership, you must also accept their financing offer as well. In fact, you can save thousands of dollars off the total cost of your car, just buy finding an auto loan from your neighborhood bank with a lower interest rate.
Put More Money Down to Lower Your Auto Loan Interest Rates
Auto loans can be very risky to banks, because cars tend to depreciate very quickly. In fact, it is not uncommon for a car to lose 20% or more of its value once it is driven off the lot. For car loans that are fully financed (no money down), this can be a very risky proposition for banks and to reduce this risk, banks usually charge higher interest rates.
One way to get a car loan with a lower interest rate is to put more money down. For instance, if you are buying a car for $20K, and put down $10K, the bank sees this as a loan with less risk and thus will usually offer a very low interest rate.
Find a Co-Signer
For those car shoppers that are buying their first car, expect high interest rates. If you haven’t yet established credit, banks are more inclined to view you as very risky. One way to reduce the risk and make banks feel comfortable loaning you money is to have a co-signer. A co-signer is usually a parent that takes responsibility for your loan. Therefore, if you are unable to pay for your car loan, the co-signer is responsible. Banks see this as a hedge making your loan less risky and thus reducing the interest rates on your loan.
